How does experience work with level gaps?

I was playing on a level 26 HC character the other day and a friend of mine asked me to power level him, with neither of us really sure how XP mechanics work in this game. He was level 12 so it was a 14 level gap. I didn't think he'd get XP, but we grouped up in Act 1 and he got a few levels at what seems like a normal speed.

So how do level gaps affect XP gain for both the higher and lower party member? And what about the level of the zone compared to your own level? If you bring someone to higher level content, will they level faster there or is there some mechanic in place where they get diminished XP? Lastly, how much higher can you be in a zone and still get XP? Like, if a zone is level 20, at what point do I need to move on?

Level scaling
Effect of level on experience
Level affects the amount of XP you gain from killing enemies, based on the relative level of the player and monsters. A penalty is applied if you are too far above or below the monster level.

There is a safe level range where no penalty is applied, which is equal to three, plus one for every sixteen complete player levels. Any additional level difference in excess of this safe range is called the Effective Difference.

So a level 24 character has a safe band of 3+1=4 levels. So from Monster level 20 to 28, there is an effective level difference of 0. At Monster Levels 19 and 29, the Effective level difference is 1. The Effective Difference matters in either direction.
Here are graphs of the experience multiplier by monster level and by effective level.

Effect of level on currency item drops
See the drop rates section above for details on how level affects currency item drops.

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Effect on experience
Only party members that are nearby (roughly two screens) receive experience from a slain monster. If one member is in town or too far from the monster they get no XP. Monsters are still made harder by players elsewhere on the level but outside of XP range.

Didn't see anything relating to exp penalty while partying with a higher level, but just looked at the thread really fast

http://www.pathofexile.com/forum/view-thread/11707 -- Game Mechanics thread, answers to most of your questions.